ROBERT REICH: Deficit Hawks Will Try To Take Advantage Of The Jobs Report

Robert
Reich is one of the nation’s leading experts on work
and the economy, is Chancellor’s Professor of Public Policy
at the Goldman School of Public Policy at the University of
California at Berkeley. He has served in three national
administrations, most recently as secretary of labor under
President Bill Clinton.

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The most significant aspect of January’s jobs report is
political. The fact that America’s labor market continues to
improve is good news for the White House. But as a practical
matter the improvement is less significant for the American work
force.

President Obama’s only chance for rebutting Republican claims
that he’s responsible for a bad economy is to point to a positive
trend. Voters respond to economic trends as much as they respond
to absolute levels of economic activity. Under ordinary
circumstances January’s unemployment rate of 8.3 percent would be
terrible. But compared to September’s 9.1 percent, it looks quite
good. And the trend line – 9 percent in October, 8.6 percent in
November, 8.5 percent in December, and now 8.3 percent – is
enough to make Democrats gleeful.

But the U.S. labor market is far from healthy. America’s job
deficit is still mammoth. Our working-age population has grown by
nearly 10 million since the recession officially began in
December 2007 but many of these people never entered the
workforce. Millions of others are still too discouraged to look
for work.

The most direct way of measuring the jobs deficit is to look at
the share of the working-age population in jobs. Before the
recession, 63.3 percent of working-age Americans had jobs. That
employment-to-population ratio reached a low last summer of 58.2
percent. Now it’s 58.5 percent. That’s better than it was, but
not by much. The trend line here isn’t quite as encouraging.

Given how many people have lost their jobs and how much larger
the total working-age population is now, we’ve got a long road
ahead. At January’s rate of job gains – 243,000 – the nation
wouldn’t return to full employment for another seven years.

When they’re not blaming Obama for a bad economy, Republicans are
decrying the federal budget deficit and demanding more cuts. But
America’s jobs deficit continues to be a much larger problem than
the budget deficit.

In fact, we can’t possibly achieve the growth needed to reduce
the budget deficit as a proportion of the total economy unless
far more people are employed. Workers are consumers, and consumer
spending is 70 percent of economic activity. And cutting the
budget means fewer workers, directly (as government continues to
shed workers) and indirectly (as government contractors have to
lay off workers) and therefore fewer consumers.

Yet deficit hawks continue to circle. State and local budgets are
still being slashed. The federal government is scheduled to begin
major spending cuts less than a year from now. Republicans are
calling for more cuts in the short term. Austerity economics
continues to gain traction.

Meanwhile Congress is debating whether to renew extended
unemployment benefits. This should be a no-brainer. The long-term
unemployed, who have been jobless for more than six months,
comprise a growing share of the unemployed. (In January they rose
from 42.5 percent to 42.9 percent).

Republicans say unemployment benefits are prolonging
unemployment, that people won’t get jobs if they get unemployment
checks from the government. That’s claptrap, especially when
there’s only 1 job opening for every 4 people who need a job.
Republicans also say we can’t afford to extend jobless benefits.
Also untrue. Jobless workers spend whatever money they get, and
their spending keeps other people in jobs.

Government should extend unemployment benefits, and not cut
spending until the nation’s rate of unemployment is down to 5
percent. Then, and only then, should we move toward budget
austerity.

The job situation is better than it was but it’s still awful. The
jobs deficit is still our number one economic problem. Forget the
budget deficit until we tame it.